Life changes when you retire – and so does how you spend your money. Whatever your plans, it’s important to keep on top of things.
So take a moment or three to work out a budget. That may sound daunting or tiresome, but the better you know your own finances, the better you will feel about the retirement decisions you make.
Remember to consider inflation rates
It is important to bear in mind that the cost of living will increase with inflation. While the State Pension also increases with inflation, income from your personal pension might not, depending on how you decide to take your money.
Can't afford to retire yet?
It can be frustrating, however there are plenty of things you can do to boost your retirement income. For example, you could:
Option 1: Carry on working and access your pension pot later
You could put off taking your State Pension and pension pot. You may not need the money just yet, in which case you might want to consider leaving your pension pot invested. The longer you leave it, the more income you are likely to get.
Option 2: You could consider deferring your State Pension
You are eligible to collect your State Pension in the week you reach State Pension age, but you don’t have to. You can defer the payment of your State Pension. If you choose this option your State Pension will increase by 1%* for every 9 weeks, that’s about 5.8%* over 12 months.
* These figures do not take into account a rise or fall in inflation rates.
Here is how it works
If you deferred a State Pension of £185.15 a week this ishow much you would get.
After one year: £195.85 a week.
After three years: £219.36 a week.
After five years: £245.43 a week.
Alternatively, if you delay taking your State Pension for a year or more, you can take the money you have built up through deferring, plus interest, as a lump sum. Whichever option you choose may be subject to tax.
There's no deferral limit
You can defer the payment of your State Pension for as long as you want, as currently there are no deferral time limits. These calculations are based on interest rates of 2.5%
Option 3: Use your property
If you own a property, you are sitting on a great resource. You could:
- Rent out a spare room.
- Downsize to a smaller property.
- Move to a different area.
And of course if you rent, you may be able to reduce your rent by moving elsewhere.
Option 4: Take your pension and continue working
You can continue to work while taking money from your pension pot. Just remember that besides the 25% lump sum you get tax free, you have to pay tax on your pension as well as any other income that you receive.
Retirement Living Standards
The Pensions and Lifetime Savings Association has an excellent resource to help you understand what life in retirement looks like at three different levels. You can access this information HERE.
You can also model your options HERE if you have a Defined Benefits pension and HERE if you have a Defined Contributions pension.